Leaked government proposals to slash tariffs to zero in the event that Britain crashes out of the EU in just 55 days’ time have left farmers and businesses aghast. This morning Trade Secretary Liam Fox refused again to rule out this possibility in front of parliament’s International Trade Committee.
This is big news, because currently large parts of British manufacturing and agriculture are protected by EU tariffs. If we crash out of the EU at the end of March, we lose tariff-free trade with the EU and fall back on WTO tariffs, making life very much harder for British exporters. The UK could levy tariffs on importers too, and try to reduce them through trade deals over time, but under WTO rules would have to initially levy the same tariffs on every country in the world. Prices of imports would sky rocket, especially as the pound would collapse in the wake of EU exit.
So Fox is examining what, for many parts of the British economy, would be a nuclear option: applying zero tariffs to every country unilaterally. No other country is likely to follow suit, so life for exporters would be just as hard. But under zero tariffs, life for many domestic producers here would become much much harder overnight. Stripped of protection, their goods would face competition from a surge of cheaper goods grown and made all around the world.
Many would simply go to the wall. For farmers producing beef or dairy, or many basic crops, or for manufacturers of clothes or cars, for instance, Fox’s plans would likely wipe them out of existence. The only way they could compete with much cheaper goods would be to adopt much lower standards, worse conditions, lower pay.
Hang on though , say the Hard Brexiters, don’t zero tariffs work well in places like Singapore? To some extent, maybe, but then again Singapore is a services-dependent city state, with very high and climbing inequality, ruled by an authoritarian regime. Surely not the model most of those who voted to leave the EU expected.
What’s more, tariffs would fall to zero overnight. You don’t have to be a hardened protectionist, or to believe that every tariff is currently optimal, to recognise the enormous pain this would cause many parts of the country. In fact, the collapse of farming and industry is likely to be highest in those areas where the vote to leave was greatest.
So why on earth is are government ministers even suggesting a scenario which would lay waste to vast swathes of our economy? Because for ‘hard Brexiters’, Brexit has always been tied to an ideological crusade to deregulate and sell off the British economy.
People like Fox, guided by the extreme free market think tanks that he enjoys meeting, seem to see parts of British farming and industry as entirely expendable. Getting rid of high standards was, after all, the whole point of Brexit for them. Writing, probably from his chateaux in France, former Conservative Chancellor Nigel Lawson told us that clearly 2 years ago when he explained that Brexit was an opportunity to “finish the job that Margaret Thatcher started” in creating a free market paradise of deregulation and privatisation. Precisely a sort of ‘Singapore on Thames’.
Why, ask these free market fanatics, do we produce food, when Africans can grow it for us more cheaply? Why do we produce clothes and electronics when China can make such things at a fraction of the cost?
The answer, of course, is that a diverse economy, an economy which creates jobs, which produces high quality, high standard products, which values workers and industries, is more likely to create a more equal, resilient and less crisis-prone society (let alone one that doesn’t fuel climate breakdown). The irony is that it is precisely the British ruling class’ inability to create such an economy that has led to the social division that gave rise to the Brexit vote in the first place. But if you think things are bad now, they will get much worse under zero tariff plans.
The result of zero tariffs would be a continuation of Thatcher’s project – the decimation of British industry and farming, and the increased dependence of the British economy on finance, and on London.
This is what Brexit Britain looks like for the hard Brexiters: even more dependent on finance and services, with London growing ever more powerful compared to the rest of the country. Inequality would rocket, as the richest used their financial power to suck wealth out of the rest of the economy. We would be the trading centre for financial products too dangerous for European standards. We would be the premier investment hub for the emerging super rich of the developing world, where everything can be bought for a good enough price. The job market for the majority will consist of cleaners and baristas, and call centre operatives and fast food workers. A service economy for the corrupt super rich has no need of a healthy and educated workforce. (Incidentally, neither is it likely to help small producers from low income countries, whose exports here would also face competition from big players based in slightly richer countries).
Where industry and farming does grow up in this brave new free market world, it would by necessity, look like US-style industrial farming with atrocious animal welfare and food safety, and industry with lower safety standards, more automation, less and worse jobs. All of this would doubtless by locked into place by Fox’s planned trade deal with the US, which would be contingent on just such lower standards.
The rest of us will have to survive on a diet of jingoism and migrant-bashing. Of course, there won’t actually be any migrants left here, but when has that stopped Britain’s political class from blaming them? Truly, this is the end point of Thatcherism.
All is not yet lost. Crashing out of the EU can be avoided, most easily through stopping Brexit via a national re-think – through another referendum, citizens assemblies or a host of other ideas to engage the public in a serious conversation about all of this.
Even without stopping Brexit, trade does not have to be conducted in the way Fox wants to. He currently has extraordinary powers given to him in the Trade Bill, currently making its way through the House of Lords, to enact his policies. The Lords aren’t keen on signing such powers over to the Trade Secretary and are engaged in a stand-off over the passage of the Bill.
We have to hope they stand firm, and reject this power grab. Otherwise, things are about to get very unpleasant indeed.
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